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Harper announces major tax cut to spur LNG export terminals

The International Monetary Fund has stated that Canada’s massive subsidization of the fossil fuel industry includes, in relation to natural gas, about $440 million in producer support and $360 million in untaxed externalities. The Tyee.ca reports, “Canada provides more subsidies to petroleum as a proportion of government revenue than any developed nation on Earth besides the United States and Luxembourg.”

Prime Minister Stephen Harper added to that yesterday by announcing a substantial tax cut to help spur the development of Liquefied Natural Gas (LNG) export terminals in British Columbia. He says that the tax cut will support job creation and future tax revenue, but if just five of the nineteen proposed LNG terminals were to be built they would release 28 million tonnes of greenhouse gas emissions a year.

While Harper pegged the tax cut at about $50 million, the Vancouver Sun reports the “savings are expected to increase in later years if the industry grows as expected, said a federal government spokesperson.” And they note, “The Canadian Association of Petroleum Producers (CAPP) has said it will allow companies to write off 90 per cent of their investments in seven years, rather than 27 years.” It’s not clear what that amount would be but, in terms of scale, Royal Dutch Shell has disclosed that it will cost up to $40 billion to develop their proposed LNG export terminal in Kitimat.

The Canadian Press reports, “Harper, who made the announcement at a technical university in Surrey, B.C., said companies will receive a capital cost allowance of 30 per cent for equipment used in natural gas liquefaction and 10 per cent for buildings at a facility that liquefies natural gas. Tax relief will be available for capital assets acquired between now and 2025.” The Globe and Mail notes, “Ottawa has agreed to grant tax relief to proposed B.C. liquefied natural gas terminals, hoping the incentive will help persuade LNG backers to make final investment decisions. …The B.C. LNG Alliance and the provincial government have been advocating for better fiscal rules federally for planned export terminals, saying the manufacturing sector already enjoys favourable tax treatment.”

That newspaper also reports, “Premier Christy Clark welcomed the new depreciation formula for equipment and buildings at B.C. LNG terminals.” That’s not surprising given her government has already cut taxes for the LNG industry. In December, the Georgia Straight reported, “The [Liquefied Natural Gas Income Tax Act] provides a 3.5-percent taxation rate on net income from gas liquefaction starting January 1, 2017. …But the 3.5-percent rate will not be in effect while companies are recovering capital investments and net operating losses. During this period, a 1.5-percent rate will be applied.” The provincial government had initially promised a higher tax rate, but after LNG corporations said those taxes were too high this corporate-friendly tax structure was announced.

The Council of Canadians believes that a ban on the development of LNG terminals and pipelines is necessary in order to respect Indigenous rights, limit greenhouse gas emissions, defend the province’s freshwater sources, protect wild salmon, and protect communities and the coastline. Our chapters have organized six public forums in opposition to LNG export terminals and pipelines. Those took place in Ladner (October 22), Powell River (November 2), Courtenay (November 4), Victoria (November 26), Nanaimo (January 28) and Campbell River (February 11).

For more on our opposition to the LNG agenda, please see our campaign web-page here.